If you have numerous student loans with different interest rates from several lenders, consolidating them may be right for you. Private student loan consolidation combines both private and federal loans all into one new private student loan with a new interest rate and set of terms. As a baseline, some consolidation or refinancing lenders are offering interest rates below 2%. In contrast, a federal consolidation will only combine eligible federal loans, and your new interest rate will be a weighted average of your existing loans not a new rate.
If you are unsure if you meet the requirements to reduce your interest rate and simplify your repayment a private consolidation, here is a checklist of items from Credible on how to get the best offer possible.
1. Apply With A Cosigner
Applying with a cosigner can help most applicants receive a better interest rate on a consolidated loan. Choosing a cosigner with a great credit history and employment record will add financial backing to your application. So, the more qualified the cosigner is, the better.
2. Have Longterm Work Experience
Proving your financial stability will reduce risk for lenders. Stable employment for over a year will help validate your financial situation and show proof of good standing on your current loan repayments. Some lenders require more work experience than others, so it is often advantageous to apply to multiple lenders.
3. Be In Good Credit Standing
Your credit score is very valuable in determining your loan consolidation offer. Lenders use your score to determine your risk as an applicant. It is recommended to have at least a 640 or higher credit score. If you have a good credit score, you will probably receive a good offer. Try to improve your credit score as much as possible before consolidating your student loans.
4. Have A Low Debt to Income Ratio
Regardless of what type of loan you are looking to take, having a good debt to income ratio is always important. Lenders will look at your monthly debt as a fraction of your monthly income. The lower your debt to income ratio the better chance you will receive the best refinancing offer possible.
5. Be Aware Of Current Market Rates
Keep an eye out on current market rates. Interest rates have been at historic lows, so this is a prime time to refinance. Stay current on interest rates trends to make sure you are not missing out on the year’s best offers.
6. Check Out Multiple Lenders
Be sure to compare multiple lenders to find the best offer on the market. Lenders have different underwriting models that determine your loan eligibility, so your degree of qualification may differ between lenders. It is possible to be denied from one lender and approved by another based on a lender’s criteria.
Check out Credible’s student loan refinancing marketplace to compare lenders and find the best offer possible.